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US Consumer Confidence Gauges to Make Headlines this Week

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US Consumer Confidence Gauges to Make Headlines this Week

US consumer confidence will be put to the test this week, as reports on retail sales and consumer sentiment are scheduled for release.

The Commerce Department on Tuesday will release April retail sales data. Retail revenues increased 0.4 percent in April, following a 1.1 percent rebound the prior month that was the strongest since September 2012, according to estimates. Excluding automobiles, retail sales are forecast to have risen 0.6 percent in April.

Retail sales capture monthly changes in receipts at retail stores. The indicator is a reflection of consumer spending and overall confidence.

Tuesday also sees the release of business inventories, a measure of inventory changes among manufacturers, retailers and wholesalers.

The National Federation of Independent Business is scheduled to report on business optimism on Tuesday.

Reuters and the University of Michigan will release the closely followed consumer sentiment index Friday. The survey, which captures personal consumer confidence in economic activity, is expected to show a slight improvement in May. Consumer confidence rose in April to a nine-month high, as sentiment concerning the current situation improved. Brighter labour market prospects may have also been a factor. The US economy added 288,000 private payrolls in April, the biggest single month surge in more than two years, according to the Labor Department.

The March payroll gain was revised upward to 203,000, official data showed.

In general, economists expect consumer spending to increase this season as warm weather and improving finances unleash pent-up demand. However, the April payrolls data reported no increase in average hourly earnings. Flat wage growth could impact the pace of consumer spending moving forward.

On the whole, it appears the US economy is recovering from the weather-induced slowdown that weighed on activity this winter. Gross domestic product increased 0.1 percent annually in the first quarter, according to an initial estimate from the Commerce Department. Economists forecast a gain of around 1.2 percent.

The latest trade data suggest the US economy may have contracted in the first quarter. Although the US trade deficit narrowed it March, it narrowed at a slower rate than initially forecast. Combined with previous data on construction and inventories, the trade values suggests the economy contracted slightly in the first three months of the year.

The Commerce Department will release revised GDP data May 29.

Federal Reserve Chair Janet Yellen does not expect the first quarter slowdown to harm US growth prospects this year. Testifying last week before the Joint Economic Committee, Yellen said the central bank expects the economy to accelerate further this year, which will continue to bring down the unemployment rate.

Consumer confidence data are unlikely to play a decisive role in the currency markets, as the US dollar continues to be influenced by monetary policy speculation and the ongoing crisis in the Ukraine. However, retail sales data will give investors an impression of US recovery at the start of the second quarter, and will test economists’ expectations about a gradual rise in consumer spending this season.

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